What is a Mortgage in Principle?

mortgage-deal

If you are looking for a mortgage, then speaking to a mortgage broker can help you understand whether you are likely to get a mortgage or not.

A mortgage in principle, also known as an Agreement in Principle or a Decision in Principle, is an agreement from a mortgage lender stating that they will lend you a certain amount of money. When you have an initial consultation with a mortgage broker, they will ask for information such as;

  • Income
  • Outgoings
  • Address history
  • Credit commitments

This will in turn allow them to conduct an initial check to see whether you can get a loan based on whether you can afford the amount you are looking to borrow, given the initial information you provided them. You will sometimes be declined if you provide incorrect information or have poor credit history.

A mortgage in principle does not guarantee that you will be successful when moving to the next stage and having a full mortgage application done, neither does it guarantee the amount you’ll be able to borrow as the mortgage broker will still need to underwrite your full mortgage application, receive and review relevant supporting documentation and organise a valuation on the property you want to buy.

Why Should I Get a Mortgage in Principle?

Whilst not compulsory, there are several benefits to having a mortgage in principle done beforehand. Given that you have taken the initial step to get a mortgage in principle, this will allow you to be aware of how much you can likely borrow and allow you to make realistic offers on properties.

In a property area where the market can move quickly, showing estate agents and vendors that you are serious about getting a mortgage by getting a mortgage in principle can be appealing, show that you are more serious about purchasing a property and that you can afford it.

Not only can this be useful for borrowers that are worried about meeting lenders’ criteria, going through these initial checks will give you an early indication on whether you’re likely to be accepted and how much you’ll be able to borrow. If you are rejected, it can also give you a chance to reassess your financial situation and fix any possible issues.

How Do I Get a Mortgage in Principle?

When applying for a mortgage in principle, your lender or adviser will ask for:

  • Personal details such as name, date or birth and address
  • Address history from the past 3 years
  • Information about your income
  • Information about your expenditure and existing credit agreements

Please be aware that when you go through the process of obtaining a mortgage in principle, it can involve an advisor or lender doing either a soft or hard credit check. A soft credit check will not be visible to other lenders so it shouldn’t impact your credit profile but a hard credit check is visible to anyone doing a search. Too many hard credit checks can have an adverse effect on your overall credit score and if you already have a bad credit profile, this will likely have a negative impact on mortgage deals available to you.

What If I’m Rejected?

There are many reasons for why your mortgage in principle could be rejected. Some reasons include:

  • You have a poor credit history
  • You’re not on the electoral register
  • You’ve not been employed long enough
  • You don’t have a long enough address history
  • You don’t meet the lender-specific criteria

Bear in mind that, even if you are rejected when assessing you for a mortgage in principle, this could sometimes be fixed by making a few adjustments to your credit profile and other means to improve your chances of being accepted.

If you would like to check your credit score, we recommend a free service such as Experian or Credit Karma UK.

Try Financial also has access to a panel of lenders that do not credit score, we may be able to help you even with bad credit and can assess all options available to you even if you are rejected.

Please note that these websites may have additional paid products and if you sign up to any trials, be sure to cancel before you are billed if you do not want to continue using their services. Try Financial are not endorsed by these businesses and only recommends using them to see your free credit score.

How Long Does a Mortgage in Principle Last?

Typically, a mortgage in principle is valid for up to 90 days. If it happens to expire before you need it, you can request another but remember that too many credit searches could end up damaging your credit profile.

For any further information on a mortgage in principle, or to speak with an expert regarding any stage of the mortgage process, please call 01473 462288 or send an email to enquiries@tryfinancial.co.uk.